OPEC out­look: higher de­mand, more com­pe­ti­tion from EVs

Financial Mirror (Cyprus) - - FRONT PAGE -

World de­mand in 2016 to­taled 95.4 mil­lion bar­rels a day and the lat­est OPEC fore­cast pushes that to 111.1 bar­rels a day in 2040. That to­tal com­prises a de­cline of 8.9 mil­lion bar­rels a day in de­mand from de­vel­oped (OECD) coun­tries and an in­crease of 24 mil­lion bar­rels a day in de­vel­op­ing coun­tries’ de­mand. China alone will add 6.0 mil­lion bar­rels a day to its de­mand over the fore­cast pe­riod and In­dia will add 5.9 mil­lion bar­rels a day.

The Out­look also fore­sees a de­cline in de­mand growth: “Long term global oil de­mand growth is fore­cast to de­cel­er­ate steadily, falling from an an­nual av­er­age of around 1.3 mb/d dur­ing the pe­riod 2016–2020 to only 0.3 mb/d ev­ery year be­tween 2035 and 2040. This de­cel­er­a­tion is a re­sult of slow­ing GDP growth, as­sumed oil price in­creases, a struc­tural shift of economies to­wards a more ser­vice-ori­ented struc­ture, ef­fi­ciency im­prove­ments as a re­sult of tight­en­ing en­ergy ef­fi­ciency poli­cies and/or tech­no­log­i­cal im­prove­ments, and oil fac­ing strong com­pe­ti­tion from other en­ergy sources.”

Among those other en­ergy sources is elec­tric­ity as fuel for elec­tric cars. Last sum­mer, Bloomberg New En­ergy Fi­nance (BNEF) fore­cast that elec­tric ve­hi­cles will ac­count for 54% of global car sales by 2040. BNEF fur­ther ex­pects just over a third of all cars on the road in 2040 to be elec­tric. That amounts to 530 mil­lion elec­tric ve­hi­cles in a global fleet of about 1.56 bil­lion, up from 1.28 bil­lion in 2015.

In OPEC’s Out­look, the car­tel reaches a sim­i­lar num­ber for the EV mar­ket by 2040 in what it calls its Sen­si­tiv­ity Case: “Fo­cus­ing on the pen­e­tra­tion of EVs [elec­tric ve­hi­cles] in the pas­sen­ger car seg­ment, an al­ter­na­tive sen­si­tiv­ity has been de­vel­oped: the Sen­si­tiv­ity Case. In this sen­si­tiv­ity, a more op­ti­mistic view is taken on the pen­e­tra­tion of EVs with the as­sump­tion that an­nual EV sales reach 80 mil­lion by 2040. This would mean that three out of ev­ery five cars sold in 2040 would be elec­tric. Un­der the as­sump­tion that the in­creas­ing EV pen­e­tra­tion in the pas­sen­ger car seg­ment in the Sen­si­tiv­ity Case spreads, at least par­tially, to com­mer­cial ve­hi­cles, par­tic­u­larly in the medium-duty seg­ment, oil de­mand in 2040 is re­duced by 2.5 mb/d com­pared to the Ref­er­ence Case, to to­tal 108.6 mb/d. More­over, global oil de­mand is es­ti­mated to plateau around this level in the sec­ond half of the 2030s.”

For OPEC, this Sen­si­tiv­ity Case is, in fact, a worst case sce­nario if BNEF’s pro­jec­tion turns out to be true. There are about 1.2 mil­lion EVs on the world’s roads and high­ways to­day, and if there are 530 mil­lion by 2040 that yields a com­pound an­nual growth rate of more than 27%.

While de­mand for oil and re­fined pe­tro­leum prod­ucts for trans­porta­tion still will be sub­stan­tial, by 2040 the hand­writ­ing could be on the wall. OPEC’s pro­jec­tion of a plateau of 108.6 mil­lion bar­rels a day of de­mand by the late 2030s im­plies that there is a cliff some­where at the other side of that plateau.

The only ques­tion is how steeply it drops off. (Source: 24/7 Wall St.com)

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